NEWSLETTER 3.2023
Dear reader,
Welcome to the third EUROFUEL newsletter of 2023. In this edition, we look primarily at the arduous challenge posed to our industry by the recently published draft act revising the ecodesign and energy labelling rules for space heaters. At the same time, we also take stock of the fast-approaching end of the long legislative marathon of the EU Green Deal with the final adoption of the revised legislative frameworks for renewable energy and the EU Carbon market, as well as the upcoming trilogue negotiations on EPBD.
As you all know, after more than two years of intense political negotiations, the EU is almost ready to give the final green light to the complete overhaul of the EU energy and environmental policy envisioned by the EU Green Deal. In particular, over the last two months, key files such as the Renewable Energy Directive, the Energy Efficiency Directive, the EU ETS and the Social Climate Fund have all been adopted by the EU co-legislators and will soon enter into force. However, that does not mean that the work is done. Some pieces of the Green Deal puzzle are yet to be finalised, including the critical negotiations between the Parliament and Member States on the Energy Performance in Building Directive, which are set to start in the coming weeks.
Nevertheless, we cannot sit idle. In March in fact, the European Commission has finally published for consultation the long-awaited draft implementing act setting new ecodesign and energy related requirements for space heaters. The proposed draft rules could very well signify the nail in the coffin of the much-taunted technology neutrality principle claimed by the European Commission.
Even though this is an uphill battle, we remain steadfast in the conviction that while electrification and heat-pumps are a solution, they are not the only one, and that low carbon and renewable liquid fuels have a key role to play in the EU path towards decarbonisation. We are thus working closely with our allies to ensure that this unavoidable reality is recognised in the upcoming legislative acts.
Yours,
Dr Ernst-Moritz Bellingen
Will consumers get to choose how they heat their homes?
On 21 March, in advance of the Ecodesign and Energy Labelling Consultation Forum scheduled for the 27 April, the European Commission published for consultation the draft acts for the revision of the ecodesign and energy labelling requirements for space heaters. The draft text includes:
- A 2nd tier of ecodesign requirements proposed by 1 Sept. 2029, setting space heating seasonal efficiency at least at 115%.
- Up-to-date technology-specific requirements for combination- and dedicated water heating in six and eight categories respectively.
- Third party conformity assessment (TPCA) for the space heating efficiency of heat pumps and hybrid heaters.
- The possible use of green gaseous or liquid fuels in the long term for the products in scope will depend on the development of safety standards under the Gas Appliance Regulation (GAR) and specific requirements are not included in the ED & EL proposals.
The proposed rules openly aim to phase out sales of stand-alone fuel and electric resistance boilers by 1st September 2029, de facto, renouncing the current technology-neutral approach and banning any type of combustion boiler relying on low carbon liquid fuels in the heating industry. A position that is openly in contrast with the one taken by the European Parliament on EPBD, as well as with the recent comments made by Paula Pinho, Director at the Commission Directorate-General for Energy (DG ENER), to the Innovation News Network, where she recognised that renewable fuels could still contribute to all Fit for 55 emission-saving targets if technical and economic risks are addressed.
During the Ecodesign and Energy Labelling Consultation Forum in Brussels, the Commission did clarify several points, including the impact assessment work, phasing out products, lifecycle cost of heat pumps, and the reasoning behind the 115% energy efficiency threshold. In particular, the Commission representative tried to stress that the proposed rules do not constitute a technology ban, as boilers can still be part of hybrid systems, and dismissed social arguments, suggesting boilers can be repaired indefinitely. However, most stakeholders were unconvinced, and several Member, including Italy, Poland, Romania, Croatia, Czech Republic and Slovakia expressed their opposition to the banning of combustion boiler. Additionally, Norway representatives shared their own experience of a ban in 2017 and warned against the unforeseen difficulties such a ban would entail.
Recognising the complexity of the issue, at least the Commission conceded to give stakeholders eight weeks to submit written comments. Following this, Eurofuel plans to prepare a formal position and will work with allies to create a united front to addresses environmental concerns, technological advancements, and economic feasibility of low carbon heating boilers in the future energy system.
Parliament adopts negotiating position on EPBD
On 14 March, the European Parliament formally adopted its negotiating position on EPBD. With 343 votes in favor, 216 against and 78 abstentions.
Despite many MEPs claiming that with its mandatory renovation targets, the EPBD risks making housing unaffordable to tenants and homeowners who are already struggling with rising energy bills, the Parliament eventually foiled attempts to torpedo the vote. Most importantly, the MEPs did confirm the welcomed recognition introduced in ITRE’s report of the role of liquid fuels in decarbonising heating, and the re-affirmation of the principle of technology neutrality. As Dr. Ernst-Moritz Bellingen, President of Eurofuel, commented: “Eurofuel has been advocating a three-steps approach for the decarbonisation of heating: energy efficiency, hybrid systems, and the incorporation of low carbon and renewable liquid fuels. This is why I am delighted to see that the role of liquid fuels and hybrid systems for heating is recognised in the European Parliament: they are part of the solution.”
As the Council already reached a general approach October last year, trilogue negotiations can now begin. However, this could be a lengthy process, as among Member States several countries, including Italy and Poland, fiercely oppose the mandatory renovations proposed. Eurofuel will closely monitor the legislative process to ensure that the stated principle of technology neutrality remains a cornerstone of the final text.
Green Deal near completion
The last two months have been filled with announcements by the EU institutions over the conclusion of the negotiations of almost all the main pieces of the EU Green Deal. In particular, March saw the European Parliament and the Council reach an agreement over the revised targets for renewable energy generation and energy savings for 2030, while in April the Parliament gave its final seal of approval to the revision of the EU Emission Trading System, including the establishment of a dedicated ETS for the housing and transport sector.
Below you can find a summary of the key changes introduced by the various pieces of legislations that will soon be entering into force:
On March 10, the Parliament and Council agreed on the revision of the Energy Efficiency Directive, setting an overall target of 11.7% by 2030, binding at the EU level for final energy consumption and indicative for primary energy consumption. The annual energy savings obligation will nearly double to ensure ongoing progress. From 2024 to 2030, EU countries will be mandated to achieve yearly savings of 1.49% of final energy consumption on average, gradually increasing to 1.9% by the end of 2030. The revised Directive also encourages companies to adopt greater energy efficiency, with large energy consumers required to implement energy management systems by default. Moreover, under the agreed rules, EU countries must promote local heating and cooling plans in large municipalities with populations over 45,000. The updated definition of efficient district heating and cooling will modify minimum requirements to ensure a fully decarbonized supply by 2050. Support for new high-efficiency cogeneration units using natural gas will only be possible until 2030, while the use of other fossil fuels in such systems will be prohibited. Last but not least, the agreement reinforces provisions on energy efficiency financing to facilitate investment mobilization. EU countries must promote innovative financing schemes and green lending products for energy efficiency, ensuring their widespread availability through financial institutions. EU countries will also be required to report on energy efficiency investment volumes.
Following the agreement of the EED, on March 30, the co-legislators also agreed to increase the share of renewables in the EU's energy mix setting a mandatory EU-wide renewables target of 42.5% by 2030, with a voluntary target of 45%. Furthermore, Parliament and Council agreed to simplify permitting for renewable power generation and reached a compromise on reducing 2030 targets for renewable fuels of non-biological origin (RFNBOs) used in the industry by 23%, under certain conditions. This compromise allows for the use of pink hydrogen in industry, benefiting France and other nuclear-supportive countries.
Last, but not least, on 18 April, the European Parliament gave its final stamp of approval to reform of the EU’s Emissions Trading System (EU ETS) and the establishment of a Carbon Border Adjustment Mechanism (CBAM) and a Social Climate Fund (SCF). The agreement's core provisions include:
- the increased ambition of emissions reductions by 2030 in the sectors covered by the EU ETS to 62%, up from the current 43%.
- the gradual phasing out of free allowances from 2026 to 2034.
- the establishment of a CBAM covering cement, aluminium, fertilisers, electric energy production, iron and steel, hydrogen, and, under certain conditions, indirect emissions.
- a transition period during which operators in CBAM sectors will only have reporting obligations will begin on 1 October 2023 until 31 December 2025. Afterwards, the CBAM will be phased in gradually in parallel to the phase-out of free ETS allowances in order to ensure compliance with international trade rules.
- the inclusion of fuel for road transport and buildings under a new EU ETS II that is scheduled to begin in 2027 but could be delayed by one year if energy prices remain exceptionally high.
- the establishment in 2026 of a new Social Climate Fund (estimated at €86,7 billion to help vulnerable households and SMEs cope with the impact of the new EU ETS II.
Commenting on the votes, EU Green Deal chief Frans Timmermans hailed it as “crucial” for climate action, saying “we are closer than ever to finalizing Fit for 55 and putting the European Union firmly on track to a greener future.”